Reserve a part of L&T’s capacity for third party firms: CCI asks Schneider

The Competition Commission of India (CCI) has ordered Schneider Electric India Pvt Ltd to modify the electrical and automation business of Larsen & Toubro Limited (L&T) that it is acquiring in order to avoid the ₹14,000-crore deal from stifling competition in the Indian market for low voltage switch gears.

Schneider Electric India is the largest low voltage switch gear maker in the country.

A statement issued by the CCI on Thursday said Schneider Electric India has been asked to reserve a part of the acquired production capacity of L&T’s electrical and automation business for supplying products to third party rivals who can sell them under their own brand names. The idea is to avoid the combined entity of the largest and second largest producers of low voltage switch gears affecting market competition.

In May 2018, L&T had signed a pact with Schneider Electric to sell its electrical and automation business for an all-cash consideration of ₹14,000 crore, as part of its long-term strategy to trim non-core activities.

CCI said in the order that it has approved the deal subject to modifications meant to removing the deal’s likely impact on market competition.

The order said that third party competitors can take L&T products on a reasonable price for selling under their own brand, for a period of five years. “Subsequently, these competitors can get access to the technology of ‘white-labeled’ products to manufacture them, for the next five years,” said the order.

Also, Schneider has to revise its commercial policies and remove de facto exclusivity in distribution agreements. This will open up the company’s distribution network to competitors. It is not allowed to discontinue L&T products or to increase their average selling price for five years, said the CCI statement.